The Guardian has added to a series of stories alleging, “Britain’s high-street banks are routinely issuing legal demands from what appear to be independent firms of solicitors designed to make struggling borrowers pay up. Yet the firms are not regulated by the legal profession’s watchdog, and are simply names used by banks’ in-house lawyers.” They allege the following:

• Royal Bank of Scotland and its NatWest arm have been using Green & Co Solicitors in Telford;
• Lloyds Bank uses SCM Solicitors in Hove, East Sussex,
• HSBC used DG Solicitors in Edgbaston, Birmingham (until January 2014).
No such firms existed on the SRA’s register, we are told. Other interesting characteristics of the letters are said to be:
• “the letters are signed by a lawyer who is individually regulated by the SRA.”
• Borrowers are often told their case has, “been escalated to a third party, using legal language such as “We are instructed by our client” and “We are likely to be instructed to commence court proceedings”.”
• The letter heading looks like that of an independent firm of solicitors.
• The letter, “typically uses a different address from that of the bank concerned”.
• Small print wording on the letters identifies the ‘firms’ as part of the bank or its litigation department.

The SRA are reported to be about to release guidance to stamp out the practice and the banks appear to be already in retreat, withdrawing or reviewing the practice. We await hearing whether there will be further action.

The banks appear to be defending themselves by saying these ‘firms’ were/are a practising name of their in-house solicitors or a trading name (not that any actual trading is going on under the name) . Wonga took their approach the furthest by (in the Guardian’s words) sending, “letters from fake lawyers, whereas the individuals signing the letters from the banks are authorised and regulated by the SRA.” Wonga also manage to give their fake firm an Irish American feel which evokes, for me at least, a flavour of 1930s Chicago, “Chainey D’Amato & Shannon”. If we’re going to go for pseudonymous fakery we may as well make our lawyers sound like gangsters, I can imagine their risk function not saying.

Lloyds is quoted as making clear, “that SCM Solicitors forms part of Lloyds Banking Group’s in-house litigation department.” And that that every letter sent out bore the name of a solicitor within the department who took responsibility for that letter. Green & Co (the Pseudonymous law firm of RBS, perhaps intent on pointing out they’re new to this and not very good virtual legal practice), “had only “a handful” of cases open…[and] acknowledged that “we must make it clearer” to customers that it is an in-house RBS team.” A logo might help there, chaps. HSBC appear to have worked this out in January when they abandoned their use of the label DG Solicitors. Lloyds even managed to use the name of a firm that once existed that had subsequently been closed: SCM Solicitors. We await their ABS venture, Enron Law, with baited breath.

To be fair it’s not just the banks who are up to this particular trick. The Guardian report that the Student Loans Company magicked up Smith Lawson & Company Recovery Services as “branded correspondence” and that utility companies may also use the tactic.
But let me return to the banks that have their solicitors bravely put their names to letters under pseudonymous letterheads and the idea that this is okay because they are regulated by the SRA. The letters are clearly intended to convey an escalation in the debt process. In one sense that is quite a clever way of doing so; a nudge, if you like. But in another sense, it looks like a deliberately misleading statement. They appear to be deliberately creating a fiction: seeking to create a belief in some of their customers/debtors that is at variance with their own. Putting the true position in small print somewhere on the letter does not change that intention. Nor will it always change the effect of the letter. Such behaviour may fall below normal standards of honesty. It may also fall below legal standards of honesty (though that is rather different from saying an offence has been committed). Let me turn then, briefly, to whether the solicitors involved in pseudonymous law firms have breached their professional obligations.

Firstly, there is a substantial risk that the solicitors who signed or were involved in the production of the letters have breached their obligation to act with integrity. This depends, in large part, on whether it is accepted that these letters were deliberately misleading. There is also a significant question as to whether the obligation to, “behave in a way that maintains the trust the public places in you and in the provision of legal services” has also been breached. More specifically, there is a question over whether Outcome 11.1 (rule 11.1 in effect) has been breached that is solicitors must not, take unfair advantage of third parties [the debtors] in their professional capacity. Perhaps unsurprisingly, neither the rules nor the guidance (indicative behaviours) take account of the possibility that lawyers might make up law firm names to threaten litigation under, but if, “using your professional status or qualification to take unfair advantage of another person in order to advance your personal interests” is likely to be contrary to O11, then using a fictitious professional organisation to take advantage of unsuspecting debtors to advance a business’s interests is also likely to be a breach of the rules.

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About Richard Moorhead

Director of the Centre for Ethics and Law and Professor of Law and Professional Ethics at the Faculty of Laws, University College London with an interest in teaching and research on the legal ethics, the professions, legal aid, access to justice and the courts.